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Pension Funds

Northern Trust plan universe notches another strong quarter with median 3.3% return

Institutional asset owners in the Northern Trust universe returned a median 3.3% in the third quarter, marking the eighth consecutive quarter of investment gains, and up from a median 3% return in the previous quarter, said data released Tuesday.

Among plan types, public defined benefit plans posted the highest quarterly return at 3.6%, followed by corporate plans at 3.2% and foundations at endowments, 3.1%.

"A relatively large allocation to international equities in public funds helped buoy returns as non-U.S. stocks were the best-returning asset class in the third quarter," said Bill Frieske, vice president and senior investment performance consultant for Northern Trust's investment risk and analytical services group, in a news release. "Public funds had a median allocation of almost 17% to non-U.S. equities, while corporate ERISA plans and foundations and endowments both had allocations closer to 12%."

For the three months ended Sept. 30, plans in the Northern Trust universe posted a median 8.3% return for international small-cap equity, 6.4% for emerging markets equity, 5% for total equities, 2.5% for private equity and less than 2% for fixed income and real estate.

Public DB plans were also the highest returning plan type for the 12 months ended Sept. 30, returning 12.7%, followed by foundations and endowments at 11.8%, and corporate plans, 10.5%.

For the three and five years ended Sept. 30, public plans in Northern Trust's universe returned an annualized 7.1% and 8.8%, respectively; corporate plans, 6.9% and 8.5%; and foundations and endowments, 6.1% and 8.3%.

"Since the market lows associated with the global financial crisis, in the first quarter of 2009, the average median quarterly return for asset owners in the Northern Trust universe has been nearly 3% — well above the 20-year average," added Mark Bovier, North America regional head of investment risk and analytical services at Northern Trust, in the release. "The primary driver of the improved results has been a sharp rise in equity prices; the median total equity program in our universe has returned 14.8% annually since the end of the financial crisis."

The Northern Trust universe consists of about 300 large U.S. institutional plans with combined assets of about $903 billion.